Market Plus: Mark Gold

Market Plus: Mark Gold


Howell: This is the
Friday, July 27, 2018 version of the
Market Plus segment. Joining us now
is Mark Gold. Mark, welcome back. Gold: Thanks, Delaney. Nice to be here. Howell: Mark, I want to
start it off here, we’re going to switch things up
a little bit here in this Market Plus. Let’s have a frank
discussion about lending and what producers are
doing to kind of manage that lending risk. You work with a
lot of bankers. What have you been hearing
moving forward as we’re getting into these really
volatile times now with trade? Gold: Well, particularly
with corn prices and bean prices where they’re at
and coming off of $8.25 beans and $3.40 corn
there’s a lot of concern out there, not only from
the farmer end of things, but on the banker
end of things. And traditionally we’ve
seen a lot of bankers lend based on the equity in the
farm, the equity in the farm has always been
pretty strong so they’re willing to lend the money. Now when they’re looking
at it and the equity is backing off and the costs
are still high but the end prices are very low, can
they make the same lending decisions as they
have made before? And in some cases we’re
seeing they’re not making those same decisions. So I think it’s going to
be crucial going forward and something I have
worked with bankers for 20 years, and farmers, is to
look at a marketing plan. It’s okay to lend money if
the farmer has a plan but so many farmers
don’t have a plan. Howell: Why do you
think that is, Mark? Gold: Well, you know,
FarmLogs came out with a survey of 1,000 farmers
and they said only 7% of American farmers use any
marketing tool for cash sales. And to me that is an
incredibly low and really shocking number. And I think farmers have
to be aware of options and futures. And I think the reason
they don’t do it, as we were talking off camera,
somebody in your family mentioned that they don’t
want to add risk to their operation by using
futures or options. Well, in fact, these
contracts are designed to help minimize that risk
and I think it’s incumbent upon people like myself
and other people in the commodity business to
educate the American farmer on what is the
right way to use these tools because particularly
in our view long options, knowing what it’s going
to cost you, putting in a downside protection,
keeping the upside open, makes a lot of sense. And we think bankers are
going to start looking at guys that have legitimate
marketing plans in place whether it’s options or
futures or just cash sales, so they know okay,
this guy has a marketing plan if the corn market
rallies, the beans, they’re going to
sell something. So, even though it may not
be penciling out today, we know farmers get an
opportunity every year to sell grain, they have
since 1972, to sell grain at profitable levels,
but they have to take advantage of that. Howell: I think that was
one of the questions I’ve been hearing from
producers and other people in the agribusiness
industry is if you have a marketing plan in place
and you have been hedging and protecting yourself
why are we putting or implementing this $12
billion bailout program? Gold: Because only 7% of
the American farmers are doing it. Obviously our clients have
been very happy what we’ve done for them, protecting
them from these kinds of things from happening. So our clients are a
little bit less vulnerable to it than the guy that is
just sitting there hoping and praying for
higher prices. And in my opinion if you
don’t like the way we use the markets with long
options there are dozens and dozens of commodity
brokers out there with different approaches to
marketing, go sit down and talk to two or three of
them, talk to us, talk to a lot of my competitors. Who do you feel
comfortable with? Who do you trust? Make a decision
and try them. If it doesn’t work out it
doesn’t mean marketing doesn’t work, it means you
need to find a different marketing guru to
help you with that. So with only 7% of farmers
doing it we need to get that number up where they
understand these tools that are
available to them. Howell: And it’s
definitely a time when I would be looking, if I
were farming, to be doing that because we’ve got so
much going on with trade and what not. And that leads us into
a social media question here. Jeff in Lincoln, Nebraska
wants to know, do you think China has figured
out a way not to have to import any soybeans or
soybean meal from the U.S. yet? Gold: Well, there was just
a blurb on the news today that the Chinese are
looking for substitutes for the meal. So we know that they’re
going to try to get around us. We know that they’re going
to book a lot of Brazilian beans, they’re going to
book a lot of Argentinian beans. Are they going to be
able to get enough? Probably not. But with our beans at such
a discount now because of this trade war talk they
can afford to buy our beans down there and in
fact if I was the Chinese I’d buy everything they
could and then say okay guys, the tariffs are off
and they’ll do very well with that. Are they going to do that? Probably not. But the fact of the matter
is they have other sources for protein, they have
other substitutes for protein, so hopefully we
get this thing resolved and we don’t have to see
the rest of the world pick up the slack
from the Chinese. It’s a big slack, the EU
is 15 million metric tons, the Chinese are 90 to
95 million metric tons. We’ve got a lot of
slack to pick up there. But hopefully things get
negotiated out well for the American farmer. Howell: I was at a soybean
conference this week in Columbia and we had a
discussion about how much could China really
substitute another product in for meal? From your perspective, how
much could they raise it? 10% substitute? What’s the total
percentage? Gold: I don’t know that
anybody really knows the answer to that but they
can do things and can they even get a hold of
American beans? You bet. There are a lot of
different ways to import beans without directly
coming through the United States. And are they going to
do that through other countries? It certainly is possible. Howell: Well that’s a good
segway into a social media question. I’m going to skip down on
the list here because we have one I think that
goes off of this well. Boyce in North Dakota
wants to know, is the EU planning to buy soybeans
cheap now and resell them to the Chinese
tariff free later on? Gold: Let’s hope not. I think the EU
needs the beans. They are getting
them cheap. So can they step in and
buy a lot of beans down here and corn if they
want it and wheat cheap? They can actually get
cheaper wheat from Russia at the moment but
that’s moving away. But right now corn and
beans are certainly viable for the EU. They need it, now if they
were to step in and buy 25 or 30 million metric
tons of beans, are they thinking that they’re
going to resell 15 million of that to the Chinese if
the tariffs are lifted? Maybe. I don’t, I really don’t
think they want to play that game. That turns them into a
huge speculator and if it doesn’t work they’ve got a
lot of answers to answer for with their own people. Howell: Yeah, they
definitely do. It’s kind of a slippery
slope to slide down. Gold: Yes, very slippery. Howell: Let’s take another
social media question here. @grainsgirl, what is the
likelihood that whatever happened to reduce spring
wheat yields will also work to reduce either soy
or corn yields in spring wheat areas? Gold: Well, I think
we saw the heat during pollination with this
rapid maturation of the crop that we’ve seen and
I think it’s going to do some damage out there. Is it enough to really
knock these yields down, to bring the
carryouts down? I don’t think so. We’ve got strong demand
for corn, which I think can help that and should
offset the national increases that we expect
over the next month or two. But if it stays relatively
dry, it doesn’t have to get necessarily hot, but
dry, we’re going to do some damage. And then as far as the
beans go, we’re heading into that time in August
where we’re going to make or break the bean crop. If it stays dry, doesn’t
have to be necessarily hot, we’re going to do
some damage out there. Howell: Absolutely. Mark, one more final
social media question. I think it’s a good one to
ask because I think it’s a question a lot of
people are asking. Tim in Crookston,
Minnesota wants to know, with the newly announced
trade or relief package for farmers does this mean
the trade war is going to be a long-term trade war? Gold: Well, I think
that’s a great question. It certainly seems like
the President has dug his heels in, the Chinese have
dug their heels in, the trade representative
testified the other day that he thinks this
could be a long battle. I’m hoping everybody
comes to their senses and realizes the trade is
great but the President wants to make sure it’s
fair and balanced trade, the Chinese want to keep
taking a lot of our products in intellectual
property That needs to be addressed. But hopefully they can
find some kind of common ground. Howell: What about any
common ground, have we been finding any common
ground in the NAFTA negotiations? Gold: Well, I think we’re
getting pretty close, maybe in August of
settling at least with Mexico. I think the Canadians and
Mexicans want a joint agreement with the U.S. and not do it separately. It looks like the
President wants to go Canada one agreement,
Mexico another agreement. But I’m hopeful we can get
something done and I think the President would like
to do that before the midterm elections. Howell: Absolutely. And those are
coming right up. Gold: Yes. Howell: Mark, thank you
so much for your time. Gold: Thanks, Delaney. Nice to be here. Howell: Join us again next
week when we look at new uses for next
generation cover crops. And Elaine Kub will sit
across from me at the Market to Market table. Until then, thanks for
watching, listening or reading. I’m Delaney Howell. Have a great week!

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